Investigation ordered after resignation of directors earlier this year
Inland Homes says it has tightened up its corporate procedures after a report by accountant FRP Advisory discovered “significant and repeated failures in Board level corporate governance”.
FRP was called in by the AIM-listed housebuilder in April following the sudden resignation of then chair Simon Bennett and board members Carol Duncomb and Brian Johnson, formerly the boss of housing association Metropolitan.
At the time, Inland said the trio had stood down after the rest of the board was not informed of issues which may be treated as ‘related party transactions’ under stock exchange rules.
In an update yesterday afternoon, Inland said FRP “was given access to the Group’s personnel, legal and financial data, and other books and records. Additionally FRP sought to speak to former senior employees and directors.”
The report discovered that AIM rules were not followed by Inland in its dealing with a company called First Place Nurseries (FPN), an education business in which former Inland chief executive Stephen Wicks and the firm’s chief financial officer Nish Malde, who, under a rejig, also announced yesterday, is stepping down as acting chief executive, both owned 40% stakes in. Inland added: “Whilst not listed as directors of FPN, they [Wicks and Malde] appear to have been involved in a number of key decisions made by FPN.”
Among the issues discovered by FRP was a 20 year lease granted by Inland to FPN in 2018 to operate at a property and temporary buildings for FPN’s Beaconsfield Nursery on Inland Homes’ Wilton Park development site.
“The lease was not disclosed to the Board of Inland Homes plc which, accordingly, did not consider whether the terms of the transaction were fair and reasonable,” Inland said.
Other discoveries made by FRP included “no rent had been charged by Inland to FPN and no rent had been paid prior to the related party concerns being raised in 2023”.
Inland added: “Invoices were subsequently raised and paid by FPN in March 2023. The rent calculation of £16,787 (excluding VAT) for the period from 26 November 2018 to 31 August 2022 is not supported by independent certification as required by the rental agreement.”
Between March 2017 and March 2023 Inland Homes also paid nearly £179,000 to hire temporary buildings used by FPN.
And last summer FPN made two interest free loans totalling £1.25m to Inland Homes – both repaid over a 10 day period last July. But Inland said that “as these transactions involved a related party, they required notification under AIM rules. The loan arrangements were not disclosed to, or approved by, the board of Inland Homes, so it was never in a position to consider whether the terms of the transaction were fair and reasonable insofar as its shareholders are concerned.”
The FRP report also says that various Inland employees spent time on FPN projects at its Radlett and Bushey nurseries in 2021 and 2022 and these costs should have been, but were not, charged by Inland Homes to FPN.
In its update yesterday, Inland said it had taken several steps “to address the shortcomings highlighted by the FRP report”.
These include appointing three new independent non-executive directors which it said were a direct response “to these historical failures in corporate governance”.
And it has created a register of related parties, introduced a formal written policy on related party matters and strengthened “an existing Register of Guarantees and Contingent Liabilities in relation to any external guarantees, commitments and undertakings entered into by any Group entity with an external party”.
Earlier yesterday, Inland Homes announced the appointment of a new chief executive and signalled its intention to shift the focus of its business northwards which will trigger a rebrand.
The firm has appointed former Gleeson boss, 75-year-old Jolyon Harrison, to the top role and agreed a £4m acquisition of West Yorkshire firm NorthCountry Homes.
In June, the £181m turnover firm delayed the publication of annual results for the year to September 2022 for a third time. It has already said it is likely to report a pre-tax loss of more than £90m when it does finally issue its numbers.
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